Tesla (NYSE: TSLA) would soon release its first-quarter delivery report. Here’s what the market is expecting from the EV (electric vehicle) giant in the first quarter.
Wall Street analysts expect Tesla’s deliveries to rise 39% YoY to 430,000 in the first quarter of 2023. While the company does not provide quarterly guidance, during the Q4 2022 earnings call, Tesla said that it expects to produce 1.8 million cars in 2023.
TSLA CEO Elon Musk said that the company has the capacity to produce as many as 2 million cars in 2023.
Tesla missed Q4 2022 delivery estimates
In the fourth quarter of 2022, TSLA delivered 405,278 vehicles, a YoY rise of 31.3%. In the full year, its deliveries rose 40% to 1.31 million.
The company’s 2022 deliveries fell short of what the company initially predicted. Even the 2023 production guidance is below the long-term CAGR of 50% that Tesla is targeting. Musk meanwhile is optimistic that over the long-term Tesla would hit the CAGR goal.
For the last few months, there have been concerns over the demand for Tesla cars but Musk has refuted that the company is witnessing any slowdown in demand. During the Q3 2022 earnings call Musk denied that demand for Tesla cars is coming down.
Musk denies demand slowdown
He reiterated similar views during the Q4 2022 call and said he wants to put those fears to “rest.”
Musk said, “Thus far in January, we’ve seen the strongest orders year-to-date than ever in our history. We currently are seeing orders at almost twice the rate of production. So, I mean that — it’s hard to say whether that will continue twice the rate of production, but the orders are high. And we’ve actually raised the Model Y price a little bit in response to that.”
Tesla lowered car prices in January
Meanwhile, shortly after its tepid Q4 2022 delivery report, Tesla announced a price cut in an apparent bid to spur sales. There has been a simmering price war in the EV industry and soon after Tesla, and Ford also lowered the price of their electric Mach-e.
Several Chinese EV companies including Xpeng Motors have also cut prices amid sagging sales.
Meanwhile, Cox Automotive expects Tesla’s price cuts would help the company increase its US market share.
In its report, Cox said, “Tesla will be the top luxury-vehicle seller in the U.S. in Q1, by far, with sales more than double that of BMW or Mercedes.”
Cox Automotive expects Tesla to deliver 180,000 cars in the US in Q1
Cox Automotive expects Tesla to sell 180,000 cars in the US in the first quarter which would mean a market share of 5%. If Tesla achieves that milestone, it would be indeed a feat and put the company ahead of Volkswagen. While the German automaker has just about a 4% market share in the US, it is targeting a 10% market share of the world’s most profitable market by the end of this decade.
Earlier this month, Volkswagen unveiled a low-cost EV model which would help it gain market share. Tesla is also working on a low-cost model and is expected to provide more details about the platform later this year.
Notably, analysts expect Tesla’s market share in the US markets to fall gradually as legacy automakers ramp up production.
Legacy automakers are ramping up EV production
Ford is targeting an annual EV production capacity of 2 million by 2026 while General Motors expects its annualized production run rate to hit 1 million by 2025.
In China, BYD outsold Tesla by a wide margin in 2022. Last year, sold 1.86 million cars which were far ahead of Tesla’s 1.31 million deliveries. Here it is worth noting that while Tesla sells only BEVs, BYD also sells PHEVs (Plug-in hybrid electric vehicles).
While BYD outsold Tesla in terms of total sales, the Elon Musk-run company is still ahead when it comes to BEVs. That said, BYD is now catching up with Tesla in BEV deliveries also and some analysts expect it to become the biggest BEV seller in 2023.
Meanwhile, Tesla’s margins and profit margins are way ahead of BYD. In fact, Tesla’s operating profits are expected to surpass that of Toyota in 2023.
Tesla stock has gained over 50% in 2023
Despite all the noise and controversies, TSLA stock has soared in 2023, and with gains in excess of 50%, it is among the best-performing S&P 500 stock. The stock tumbled on the first trading day of 2023 after it missed Q4 2022 delivery estimates, but has since rebounded.
Cathie Wood of ARK Invest who is among the biggest TSLA bulls said that the stock could rise to $1,500 over the next five years. Last month, Ron Baron also said that Tesla stock could rise to $1,500 by 2030.
All said Tesla’s Q1 2023 deliveries and thereafter the earnings release later in April would help markets gauge how the price cuts helped the Elon Musk-run company increase sales and at what cost of its gross margins.
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